Western Union CIO: Bitcoin No Solution for Today's Market

For Western Union chief information officer John “David” Thompson, bitcoin represents an innovative technology that, if successful, could significantly impact the way people transact and exchange information.

Yet the path he sees to that future is fogged by regulatory and cultural challenges that are yet to be resolved.

In conversation with CoinDesk, Thompson detailed how he invested in bitcoin mining in order to learn more about nuts and bolts of the technology – a process that he continues to this day.

“I have some [KnCMiner] Neptunes – about two terahashes in bitcoin mining,” he said. “It’s done well.”

Thompson said he began mining both personally and professionally to see what the technology could do and if Western Union could potentially benefit from its implementation.

Still, while there is potential in certain applications of the technology, he said, it remains to be seen whether bitcoin moves past being what he called “a solution looking for a problem to solve.”

Western Union, he said, is interested in seeing how the technology grows amid an evolving regulatory environment. As a global company, he explained, Western Union looks at a landscape of hundreds of legal jurisdictions, each with their own specific standards on money transmission and transaction oversight.

Thompson continued:

“Bitcoin as a technology doesn’t solve any problems for us in the core of our business. Our challenge is the last mile. How do I get that money in the person's hand, and meet all the regulatory compliance needs in that country? So, I don’t really need it for the minimum. Moving a bit from Point A to Point B isn’t hard. The last mile is really hard.”

At the same time, Thompson told CoinDesk that Western Union is open to the technology and will continue observing its development to see if it can provide solutions to challenges it faces.

Consumer adoption questions

Thompson said that Western Union likely won’t take active steps to integrate bitcoin until it sees demand from its customers. For now, according to Thompson, there isn’t any interest on the part of the company’s global customer base to make the company take that next step.

“To me, it’s one more funding vehicle, one more payout vehicle. And, to be honest, our digital savvy customers are probably going to be the first customer base asking for it.”

“Does it solve regulatory concerns? Does it get better visibility? Does it reduce risk? In my mind, those are still questions to be answered.”

Thompson continued: “But that doesn't mean that we aren’t looking at it, how we enable [usage] legally, what licenses we need in addition to what we have. In the context of regulation, New York is starting to have this dialogue. Opening comments are out there on the licensing scheme. This is one state – we operate in 220 countries.”

Thompson cited fiduciary duty to both shareholders and customers as a reason to look at new and innovative technologies – but not at the expense of profitability. At the same time, he reiterated that it’s too early to tell how or why the company would integrate bitcoin.

Calling it an “infant technology”, he said that the industry needs to be developed further and that questions surrounding its legal status must be answered.

“I do think there is promise there,” he said. “There should be investments.”

Thompson said that Western Union is actively looking at the technology, conducting studies on whether some of the issues they experience on a global level could be mediated by digital currency.

Search for use case continues

Thompson also addressed the issues that have dogged the remittance industry in certain developing global markets, where the risks of serving customers has caused providers to stop services.

Despite potentially lowering the cost of remittance providers to extend service to these areas, he said this is only one challenge for the industry. Rather, he isn’t convinced that bitcoin can solve fraud, money laundering and terrorist financing – issues that create challenges for businesses in the market and deter new entrants entirely.

Thompson explained:

“Bitcoin as a technology, as a capability, doesn’t mitigate any of those concerns. It doesn’t offer anything of value in addition to that marketplace. You still have the regulatory issues, you still have the fraud prevention issues, the consumer protection issues in that marketplace. So, I don’t see a connection there to make that market better with bitcoin.”

On a broader level, Thompson noted he wasn’t convinced that bitcoin will succeed on a global scale as a remittance pipeline. Instead, he foresees regional usage within smaller markets where usage isn’t hampered by the challenges of cross-border transacting, saying:

“It might be a niche product, a niche capability for domestic money transfer. But for global money transfer, does it add value? Does it really solve that last-mile problem? Does it solve regulatory concerns? Does it get better visibility? Does it reduce risk? In my mind, those are still questions to be answered.”

“There’s promise there, but I wouldn’t put my money on it yet,” he added.

Transparency needed to grow adoption

That said, Thompson said that there were ways that the remittance industry can change to help facilitate global bitcoin adoption. Above all else, he advocated for transparency on both the development side as well as the transaction authentication side.

Saying that he likes the concept of an open global ledger, he argued that aspects of the market “cannot hide behind a shield of technology”.

“You have to be transparent in financial transactions,” he said.

Thompson continued:

“I think if it we can get this to a level where it’s a truly global ledger, fully identified entities, then it can have promise. But I think there’s going to be groups popping up around KYC, groups popping up around anti-fraud. There could be investments in that area.”

He also noted that the the growth of alternative digital currencies and other protocol implementations means that the community itself is still in an active period of development. According to Thompson, this reflects the evolution of nearly all other new technologies and that it’s unclear where the industry itself is headed.

Research, investment for Thompson to continue

While Western Union will continue its stance of observation and study, Thompson said he plans on continuing to both buy bitcoin and expand his mining capabilities.

“I’m going to continue to invest a portion of my income into mining and exploring opportunities with it, understanding the marketplace,” he said.

He called the industry itself “ripe for opportunity and innovation” and said that Western Union has an interest in seeing digital currency grow and develop, adding.

“From a Western Union perspective, it’s watch, learn - potentially encourage some innovation in certain areas that could potentially solve a problem for us. Encouraging innovation in areas where we can truly have a problem solved is awesome.”